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ServiceLink, the national lender platform for origination, loss mitigation and default servicing for Fidelity National Finance(FNF) reported Tuesday that its improved loss mitigation business model has shown dramatic decreases in the amount of approval and closing timelines for short sales. ServiceLink now boasts that a streamlined short sale will take less than 74 days. A usual short sale can take over five months.
ServiceLink stated that it relinquished completed package and contract acceptance to less than 30 days from the moment it receives the file assignment from the servicer with its updated streamlining process. Just a year ago, the industry was constrained by delays as long as three months. Contracting approval to closing time has been reduced to less than 45 days, according to the company. ServiceLink now employs closing teams to support a servicer through liquidation as well as the closing process. The model also employs customized technology to each lender's workflow and give ServiceLink digital access to all files at any processing stage.
Greg Hebner, president and CEO of MOS Group, a loss mitigation and mortgage resolution firm, described why the short sale process is so extensive in HousingWire's weekly column, Open Season.
"A typical short sale usually involves a borrower, servicer, title company, valuation company, real estate agent, junior lien holder, mortgage insurance company and a closing or escrow company — and that’s just on the sell side of the transaction," wrote Hebner. "If a servicer doesn’t have a technology platform designed to promote collaboration and sharing of information, timelines and transaction status, there is a high probability that key tasks will not be performed and the process will get bogged down."
That's what JK Huey, a vice president at Wells Fargo, wants to avoid. What Huey says bogs down the process, however, is not pre-checking buyer access to finances, and warns agents not to just assume buyers can get the money.
"We want to encourage clients to obtain a credit-check before," Huey said, adding that the lender is looking to streamline the short sale process to "around 30 days."
While streamlining short sales no doubt benefits the borrower as well as the servicers, it comes with a fair amount of risk and potential monetary loss. According to a report by CoreLogic, "The Cost of Short Sales," short sales will cost an unnecessary $310m in losses in 2010, an average of $41,500 per deal, an average of every 53 short sales.
The report noted that lender risk increases with short sale transactions when the second sale amount is vastly higher than the short sales amount, and/or the two sale transactions are executed within a very short window of time. Mortgage fraud is also more likely, especially if the process is hurried.
CoreLogic also found that since 2008, the number of short sales in the market has more than tripled to an estimated annual volume of 400,000 meaning there are more short sales to process in a smaller amount of time. ServiceLink alone reported a 35% increase in short sale inventory over just the last quarter. CoreLogic suggested many ways to try to detect mortgage fraud in short sales including requiring borrowers to confirm that they are not aware of any other parties or contracts associated with the property.
Write toChristine Ricciardi.
The author holds no relevant investments.

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